Union News & Announcements
Taft Hartley Health Fund
Questions & Answers
Based on the numerous communications that we have received over the past weeks regarding the decision of the Globe/BNG Health Fund trustees to change health insurance plans, the Fund trustees, with the help of their advisors, have developed the following Questions and Answers to help educate the Guild membership not only about the planned change but to provide some basic information about the Health Fund itself, the role of the trustees, health insurance rate setting, and the basis for the trustees decision. We hope you will read this before attending one of the many meetings that are scheduled for later this month.
Taft Hartley Fund Basics
Q1. What is a Taft Hartley Health Fund?
A. A Taft Hartley Health Fund is a trust fund established through collective bargaining between a company and a union (or multiple companies and unions) to provide health and related benefits for covered employees and their families. It is subject to the provisions of the Employee Retirement Income Security Act (“ERISA”). The fund and its assets are managed by a joint board of trustees equally representative of management and labor.
Q2. What is the role of the trustees, who are they and who selects them?
A. The role of the trustees includes balancing the interests of the fund and its members, carrier selection, benefit and plan design implementation and management, selection of and consultation with benefit and actuarial consultants, determination of eligibility for fund coverage, financial management of the plan’s income, expenses and reserves and a fiduciary responsibility for the assets of the fund.
In the case of the Guild fund, the company trustees are selected by the Senior Vice President of Employee Relations, Greg Thornton, who is also a Fund trustee. The other two company trustees are Harriet Gould, Vice President of Employee Relations and Steve Behenna, Director of Benefits. Steve is also the Fund administrator. The union trustees are selected from the Executive Committee. Dan Totten, the Union President, Scott Steeves, the Vice President and Patrice Sneyd, the Treasurer are the current union trustees.
Q3. Why are Guild employees covered under the Taft Hartley Fund and management employees are not?
A. Nearly all of the Globe’s unionized employees are covered by individual Taft Hartley funds established through collective bargaining between that union and the Globe. The Guild Taft Hartley Fund was established in 1994 through collective bargaining. You can find the contract provisions governing the Fund on pages 51 through 53 of the contract. Management employees receive their benefits through the New York Times Company, which are the same benefits for all NY Times non-union employees. Individual Globe management employees have no input into selection of their health insurance carrier, plan design nor changes in their premiums. Those decisions are all made by the New York Times Company at the corporate level.
The Current Status of the Health Fund
Q4. What are the sources of funding for the Health Fund?
A. The Globe contributes to the cost of employee health insurance through negotiated payments which are listed on p. 52 in the contract. These payments, also known as “quid pro quo” payments have been negotiated over a series of contracts beginning in the 1980s. That is the mechanism that the Globe utilizes with all its unions to pay for health insurance benefits. Prior to the contract ratification vote on July 20th the total annual payments that the Globe made to the Fund was approximately $4.5 million. The remainder of the cost for health insurance is paid by employees through pre-tax payroll deductions. Those are the only two sources of funding which the Fund can accept.
Q5. What is the current cost of the health plan we now have?
A. The annual premium cost to the Health Fund to provide the medical coverage which members currently have through Harvard Pilgrim Health Care and dental coverage through MetLife is $5.7 million annually of which the Globe was paying approximately $4.5 million or 79% prior to the July 20th ratification vote.
In order to help meet the target of $10 million in reduced labor costs, the membership voted to give up a total of $1,534,349 annually of the $4.5 million then being paid. That reduced the Globe’s funding to 54% of the plans’ costs. In addition, there is a one time quid pro quo payment of an additional $217,651 which is to be deducted this year only as part of the mitigation expense from the pay-back of the 23% pay decrease. As a result, the employees covered by the Fund must make up the short fall in the plan’s funding through increased payroll contributions.
Q6. Is there a current balance in the Health Fund? How much is it? How much has to be maintained in the account?
A. There is no mandated reserve held in the Health Fund. However, one of the responsibilities of the trustees is to ensure that the Fund is solvent. We try to maintain a sufficient balance to allow for changes at open enrollment, the cost of members who switch from individual to family coverage, addition of new employees and, if possible, a small amount to mitigate future renewal rate increases. The Fund reserve was $384,909 as of July 1st but that has decreased each month as premiums have not increased in line with the decrease in Globe Fund contributions effective August 1st. As of October 1st we project the balance in the Fund to be $35,000, which is very low.
Q7. Last week the trustees announced increases in the current health fund premiums. Why aren’t these increases sufficient to fund the current plans?
A. The new rates were characterized as what they are - a stop gap measure which will allow the Fund to remain in the black through the end of the year. Those increases are insufficient to carry the premium shortfall until May. If we did nothing to change the plan design until the current renewal date of May 1st the actual monthly cost for the premium would need to be: $70.50/individual and $164.27/family with part time employees contributing 1.5 times that rate. If you do the math and you divide the annual shortfall of $1,534,349 by twelve, the monthly gap is $127,862. That deficit gets split between individual and family participants.
The Need to Move to a High Deductible/HSA Plan
Q8. Why can’t we merely make some adjustments to the plan design of the coverage we now have?
A. Adjustments to plan design will not achieve sufficient savings to the cost of the current health insurance. For example, an increase in the current in-hospital co-pay from $500 to $1000 only saves $47,521 in premium cost; increasing the HMO specialist visit co-pay is worth $35,740 and increasing the emergency room co-pay from $75 to $100 is worth $53,461. These modifications get you nowhere near the $1.55 million shortfall needed to cover the current plans’ premiums.
Q9. Why haven’t the trustees looked at other carriers?
A. The trustees recently marketed this group to the major local carriers before the renewal was effective last May 1st. Vendor proposals were reviewed then. At the end of this process the trustees concluded that Harvard Pilgrim’s 5% rate increase over that for the prior plan year was competitive – indeed, lower than that of the other carriers. It was through this same process that the trustees decided to change dental coverage from Delta Dental to MetLife, which saved $48,000 annually in premium cost.
One major advantage which the Guild Health Fund has in remaining with Harvard Pilgrim is that all the other Globe/union Taft Hartley funds also are insured by Harvard Pilgrim. Over the years the Globe has used the buying power of the funds as a whole to help drive down Harvard Pilgrim’s administrative costs for all the funds, including the Guild. If we were to change to a different carrier, that benefit would be lost. We estimate that saves the Fund $50,000 to $60,000 annually.
Q10. This seems like such a dramatic change. Did you look at other plans? What would they cost?
A. We looked at other plans and the annual savings were insufficient to make up the shortfall in cost. Many studies have shown that high deductible plan designs do curtail unnecessary medical services without compromising quality. In order to control the Fund’s costs going forward, we must control the utilization of medical services as the membership ages. It is also critical that we encourage members to seek preventive care in order to avoid unnecessary and higher cost services if a medical condition goes untreated.
Q11. Some of us would rather stay with the plan design we currently have and pay higher premiums, even double the current cost since it seems it would cost us less than paying the high deductible combined with co-insurance payments plus weekly premium deductions. Why can’t we do that?
A. While that approach may favor some employees, others are clearly benefited from the high deductible/HSA plan the trustees have selected for the membership. It is one of the trustees’ responsibilities to provide the best coverage for the group as a whole. Employees whose families or who themselves do not every year heavily utilize health insurance, drug coverage, etc. are clearly better off with this new coverage.
We also took into account that premium costs are expected to increase each year. Current trend rates in the New England market have insurance carriers increasing rates in 2010 by 10% or more. Our paper covered this issue in Wednesday, September 16th front page story by Bob Weisman, “Health care costs to rise again”. With Globe contributions to the Health Fund fixed for the foreseeable future at the current level it seemed most prudent to make a change now to a high deductible/HSA plan. Other Globe- union Taft Hartley health funds have already made this change.
Q12. If the current plan design and cost is better for some employees and the high deductible/HSA is beneficial for others, why not offer both?
A. Premiums are based on the expectation that there will be some light users/healthier employees, some moderate users and some heavy users among the group. The principle of adverse selection would result in the migration of the employees who experience higher utilization (and cost to the carrier) into the current plan design and those who utilize less into the high deductible/HSA. In short order, the current program rates would spiral out of control and end up costing the Fund much more money.
Q13. What information did the trustees rely on to make their decision?
A. The trustees have been meeting regularly since early August to review the current Fund status and the alternatives available to the Fund. We have met as a group with our benefit advisors, our benefit advisors have met with representatives of Harvard Pilgrim, and the trustees, their advisors and representatives of Harvard Pilgrim have met together. The advisors looked at the recent prior proposals submitted by the other local health plans, BNG specific claims and utilization data and independent actuarial cost projections to develop their recommendation to the trustees.
Q14. Why weren’t we given more notice about such a dramatic change?
A. It took several weeks for the trustees to analyze options and to concur that the best path for the Fund to take was to switch to a high deductible/HSA plan. At that point we also concluded that given the ongoing drain on the Fund’s reserves from the negotiated decrease in the Company’s contributions that putting the change in as soon as possible was the most fiscally prudent course. We were also trying to avoid a two-step change in rates as we will now have. That said, once we became aware of the concern we reversed course and have postponed implementation until January 1st.
Q15. Why is our plan so expensive? If you look at the Mass Connector, a web site for state provided health insurance, there are plans which appear to be less costly with a decent plan design.
A. The MA Health Insurance Connector is a state agency created in 2006 to provide affordable health insurance coverage to individuals without access to employer-sponsored coverage. Because the Globe contributes to the cost of a medical program for Guild-represented employees, you would not be able to participate in these plans. Each carrier offers a "low", "medium" and "high" plan of benefits. Premiums are age based so that older individuals pay more for the same coverage as younger ones. The Guild’s Health Fund plan costs are driven primarily by participants’ claim experience. Recent news coverage of the Health Insurance Connector has suggested that costs have exceeded budgeted expectations, also reflecting the high cost of health care in Massachusetts.
Q16. At the conclusion of the meetings, will the membership get to vote on what it prefers?
A. No. The plan design is a trustee decision. However, we will listen carefully to all the comments and respond to questions but at the end of the process it is the trustees’ responsibility to make their decision in the best interest of the Fund and the group as a whole. Keep in mind that the vast majority of employees who are not covered by Taft-Hartley funds have no input whatsoever in the structure or cost of their health insurance coverage.
The Basics of a High Deductible/HSA Plan
Q17. What is an HSA Plan?
A. An HSA is a new form of consumer directed health coverage pairing a high deductible health plan with a tax -free portable account used for health care expenses (e.g., medical, dental, and vision) which can build over years into your retirement. The money is put in on a tax-free basis, the investments yield grows tax -free, and qualified withdrawals are also tax-free. If you leave the Globe, your HSA account is portable and goes with you. Unlike the current Flexible Spending Account, to which many of you contribute, in which you “use it or lose it” at the end of the year, HSA contributions roll over from year to year. You can use funds in the account to pay for deductibles, co-pays and services which are not covered by your health insurance. The HSA can also be used to defer income (subject to annual contribution limits) and pay for eligible retiree medical premiums.
Q18. How will our HSA be funded?
A. The current plan is for the Fund to contribute $1000 to each full time employee for family coverage and $500 to each full time employee for individual coverage. Part time employees who participate would receive $333 for individual coverage and $666 for family coverage. For 2010, the maximum employees and the Fund will be allowed by law to contribute on a combined basis is $3050 for single employees and $6150 for family coverage.
Q19. If I incur a large expense early in the year, what money is available to me to use?
A. You can only use the funds which are available in your account. The Fund will make its contributions on a monthly basis. You may also make periodic contributions to the HSA, up to the legal limits, on a pre-tax basis to pay for eligible health care expenses.
Q20. I have never heard of this type of plan. Who else has it?
A. These types of plans have now been in existence for several years. According to industry benefit surveys, high deductible plans are becoming more prevalent as premiums for more traditional plans continue to climb beyond affordability for most employers and their employees. Other Globe-union Taft Hartley Funds have switched to a high deductible plan and others are looking into it.
Q21. Doesn’t this type of plan discourage usage and result in more expensive illnesses for the covered employees?
A. The plan is designed to help individuals be wiser health care consumers by focusing on less expensive, but equally effective treatments for their health care needs. For example, use a lower cost generic or preferred brand drug instead of an expensive non-preferred brand. A less expensive outpatient facility can be used to get an MRI instead of going to the hospital where the cost is two or three times as much. Use high quality community-based hospitals, like Newton Wellesley or Milton Hospital for selective services instead of tertiary hospitals such as Mass General, Beth Israel and other such state-of-the art facilities designed to provide specialized health care. Harvard Pilgrim’s nurse line can be used to triage emergency services to avoid unnecessary and costly visits to the emergency room.
Many studies have shown that high deductible plan designs do curtail unnecessary medical services without compromising quality. In order to control the Fund’s costs going forward, we must control the utilization of medical services as the membership ages. It is also critical that we encourage members to seek preventive care in order to avoid unnecessary and higher cost services if a medical condition goes untreated. Thus, in order to encourage preventive care it is important to note that preventive care visits are covered in full.
September 23, 2009